Massachusetts Home Buyer Guide

MA Legislation Would Require Loan Modifications

Legislation filed in Massachusetts would require  lenders to modify home loans in certain circumstances, the Boston Business Journal reported January 27, 2009. 

The legislation named, An Act to Require Commercially Reasonable Efforts to Avoid Foreclosure, was filed by Massachusetts Attorney General Martha Coakley, with Senator Susan Tucker and Representative Steven Walsh, would mandate loan modifications in certain circumstances.  

Specifically, the legislation requires that creditors take commercially reasonable efforts to avoid foreclosure upon mortgage loans securing homes that are owner-occupied.  This would apply only to loans on principal residences, and to loans with certain risky features, such as interest-only loans, adjustable rate mortgages, and loans with short-term, introductory interest rates.  The legislation also provides a "safe harbor" for creditors to comply with this requirement of commercial reasonableness. 

A violation of this legislation will constitute a violation of Massachusetts General Law Chapter 93A, which is the Massachusetts Consumer Protection Act. 

This really is an amazing piece of legislation. State government is now forcing private businesses to operate their business a certain way and mandating those businesses to make certain business decisions. 

Foreclosure Listings Absolutely Free

Read The Boston Business Journal Article

Read Attorney General Coakley's Press Release

Summary of the Legislation Filed

Full Text of the Legislation Filed

Using An Attorney When Buying A Home

Boston Real Estate Now, Boston.com's real estate blog, had a post by exclusive buyer agent Rona Fischman about whether a buyer should use his or her own attorney or just use the lender's closing attorney. Below is the post in part.

"Here are the options:

"Why hire a separate attorney?
The attorney represents the lender at closing. Therefore, the attorney is not on the buyer’s side when he/she is reviewing the Settlement Statement. What if there is an overcharge?
The closing attorney makes a commission on title insurance. Can the buyer get a good legal opinion in this situation? Will the attorney be objective in advising the client about whether or not to buy it?
What if there is a different conflict of interest with the lender that only a lawyer would recognize?

"Why use the same attorney?
The buyer can save money by having one attorney do both jobs.
The attorney has no conflicts of interest because the interests of the buyer and the interests of the lender run parallel. They both want clear title, accurate flood zone maps, smoke/CO certificates and such.
The closing attorney is in a better position to solve problems with the lender at closing.
The buyer’s attorney is redundant at closing.

"Some of my buyers do it one way, some do it the other way. Either way has resulted in problems, in some instances.

"Lawyers, what do you think? What do you do, and why?

Buyers, what did you do? Did it work out?"

I commented on the post as follows.

"Absolutely get your own attorney.

"The [closing] attorney represents the lender at closing." That is all you need to know.  Should buyers work directly with listing agents? Of course not. Although the lender and buyer have similar  interests, those interests are not always aligned. Just like a listing agent has no obligation to keep what a buyer tells him or her confidential, a closing attorney could tell the lender something confidential he or she heard from a buyer.

"In addition, most closing attorneys have a very close relationship with the mortgage broker/loan officer that referred the business in the first place.

"In my experience, many mortgage professionals will tell borrowers that their closing attorney 'will review the purchase and sale agreement for free.' You get what you pay for.  This usually results in a couple of minor changes to the Standard Purchase and Sale Agreement, if any at all. I have heard of situations when the review comes after the parties have signed. That's a real big help!

"A real estate attorney representing a buyer should add a multi-page addendum to the P&S that protects the buyer's rights, interests and deposit. The Standard Purchase and Sale Agreement dramatically favors the seller.

"'The closing attorney is in a better position to solve problems with the lender at closing.' So what? S/he can still do that when the buyer has a personal attorney.

"'Buyers, what did you do? Did it work out?' The problem with this question is that 99.9 percent of buyers who are not real estate lawyers would not know whether their deposit was at risk or whether their loan commitment/rate lock could have expired. Just because those things didn't happen doesn't mean everything with the P&S was fine. It's not what you don't know, it's what you don't know you don't know.

"I am sure that there are many closing attorneys that do an excellent job for buyers, but situations do arise that make it impossible for a closing attorney to effectively represent the buyer and the lender.

"On the other hand, using a lawyer that doesn't do real estate very often might not be a much better situation."

Needless to say, I don't think buyers should use the closing attorney to review the purchase and sale agreement.

First-time Home Buyer Tax Credit

The Housing and Economic Recovery Act of 2008 signed into law on July 30, 2008 provides for a first-time home buyer tax credit up to $7,500.

The law applies to home purchases made from April 9, 2008 through June 30, 2009.

The National Association of REALTORS® (NAR) has put together a list of frequently asked questions about the new tax law.

Read NAR List of Frequently Asked Questions

Communities Fight Affordable Housing Projects

Many communities across the Commonwealth have fought plans for affordable housing projects under the state's affordable housing law, commonly referred to as Chapter 40B.

The North Shore Association of Realtors' government affairs blog keeps up with Chapter 40B projects on the North Shore.

Purchase & Sale Agreement Isn't Buyer Friendly

The so-called "standard" purchase and sale agreement isn't very standard, unless you're the seller.

Read the guest post I wrote for the Boston Condos Blog about just some of the changes an attorney should make to the purchase and sale agreement on behalf of home buyers.

Patrick Administration Proposes Mandatory Home Engery Efficiency Inspection At Time Of Sale

Massachusetts Governor Deval Patrick's administration has proposed a bill that would require an energy efficiency inspection as part of the home sale process, the Boston Herald reported on January 9, 2008.

Homeowners across the state would need to have energy audits done on their properties before selling them, if the proposal passes.

"The requirement could take $15 million a year out of the pockets of home sellers in Massachusetts, with the inspections likely to cost anywhere from $150 to $300, the Massachusetts Association of Realtors estimates. The inspections are part of a sweeping energy reform bill backed by the Patrick administration and set to be debated in the state Senate."

Read The Boston Herald Article

Read A Boston.com Post About The Bill

It Apparently Passed The Massachusetts Senate

Title Insurance

The Boston Globe's blog had an interesting post regarding title insurance. The post was the result of an article Globe reporter Binyamin Appelbaum wrote about purchasing his home in Boston.

Binyamin chose to skip the owner's title insurance policy, which apparently prompted many critical emails, mostly from lawyers. You see, lawyers make money from issuing title insurance.

The post also received several comments.

My comment to the post was as follows:

Binyamin, congratulations on your new home. Best of luck to you and your girlfriend.

I am a lawyer and a real estate broker. I do not represent banks at closings, so I do not certify title or sell title insurance.

I spend most of my time working for the clients of my exclusive buyer brokerage firm. I would estimate that about half my buyers decide to purchase title insurance policies. I purchased it when I bought my home in 1997.

I don't blame you for being upset about the lawyer adding the cost of an owners policy to the settlement statement (HUD) without discussing it with you. It frustrates me when closing attorneys just add the policy to the HUD. They're basically giving themselves a raise at your expense and without your permission.

The closing lawyer should have contacted you prior to closing (or contacted your lawyer) to discuss whether you wanted the owners policy or not. He probably contacted your lawyer to ask how you and your girlfriend wanted to hold the property, i.e., tenants in common or joint tenants, if he was the one that drafted the deed.

Another item that closing lawyers routinely add to a settlement statement without asking buyers permission is a declaration of homestead, commonly referred to as a homestead deed. Everyone should have one. It takes about five minutes to draft this document and $35 to file it at the registry of deeds, but I have seen attorneys add from $50 (very reasonable) to $150 (ridiculous) to the HUD for it.

I provide my clients with a brochure explaining what title insurance is and what it covers, and I typically inform them of the percentage of the premium that goes to the lawyer. One of the important things (in my opinion) tile insurance covers is attorneys fees. Even if a title defect is something minor and fairly easily resolved, the one-time premium probably is less than the cost of potential attorneys fees.

My opinion is that title insurance is a useful product. One could certainly debate whether it is too expensive.

What annoys so many people (apparently you too) is the mystery surrounding it. Why not just send a letter to buyers a week prior to closing with a brochure explaining title insurance and indicating in the letter that the closing attorney gets a percentage of the premium? Some closing attorneys do, but not the majority.

The bottom line: You probably should have bought the owners policy, but I understand why at that moment you decided not too.

By the way, I enjoyed your article. I appreciated your honesty about being "stumped repeatedly" despite being a real estate reporter. It's so important for home buyers to have professionals they can trust help them from the beginnings of the home search through the closing.

- Posted by Rich Rosa December 10, 07 07:07 PM

You can download the title insurance brochure (Download Title Insurance Brochure) that I provide my clients. 

Finders Keepers

A contractor who found collectible cash worth about $500,000 in metal boxes hidden between the studs of a bathroom that he was renovating is suing the home owner to keep the money, after rejecting her offer of 10 percent, The Plain Dealer, a Cleveland newspaper, reported on December 12, 2007.

Bob Kitts was working on the 83-year-old home near Cleveland, owned by a high school friend, Amanda Reece, who was away at the time.

After he found the first box, the contractor called the home owner who rushed home. Together they found four more boxes full of cash and religious memorabilia. Appraisers determined that much of the more than $100,000 in depression-era cash were collectible rare 1929-series Cleveland Federal Reserve bank notes, worth about $85 each.

Apparently the money can be traced back to a businessman who owned the home during the Great Depression. The businessman apparently died unmarried and childless. I smell a great niece making an appearance in court soon.

The contractor claims he found lost money and Ohio law says it’s finders keepers, if there’s no owner likely to appear to collect the treasure.

The home owner says the money is hers and the contractor is just trying to “shake” her down. You think?

At this point it looks like a judge will have to decide.

I can't help thinking like a lawyer when I hear stories like this one. Maybe anyone who owns an old home should include a clause in any contracts with contractors spelling out that anything found anywhere in the home or on the property belongs to the home owner.

Of course, this contractor never had to tell the home owner he even found the metal boxes.

Read The Plain Dealer Article

Good Advice For Dealing With Builders And Contractors

Real Estate attorney Stephen E. Meltzer, writing for the Boston.com real estate blog on October 31, 2007, provides good advice for dealing with builders and contractors.

Many builders and contractors are feeling the pain brought on by the sluggish housing market. Attorney Meltzer provides some tips to protect yourself.

If you're planning on buying new construction or considering an addition or a renovation, you'll want to take a look at this post.

Read The Blog Post

Types of Real Estate Agency in Massachusetts

The following are the different roles real estate agents play in Massachusetts. The information below comes from the mandatory agency disclosure form real estate agents and brokers must provide potential clients at their first substantive contact. I made some sections bold for emphasis.

SELLER'S AGENT
A seller can engage the services of a real estate agent to sell his property (called the listing agent) and the real estate agent is then the agent for the seller who becomes the agent's client. This means that the real estate agent represents the seller. The agent owes the seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put the seller's interests first and negotiate for the best price and terms for their client, the seller. (The seller may authorize sub-agents to represent him/her in marketing its property to buyers, however the seller should be aware that wrongful action by the real estate agent or sub-agents may subject the seller to legal liability for those wrongful actions).

BUYER'S AGENT
A buyer can engage the services of a real estate agent to purchase property and the real estate agent is then the agent for the buyer who becomes the agent's client. This means that the real estate agent represents the buyer. The agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put the buyer's interests first and negotiate for the best price and terms for their client, the buyer. (The buyer may also authorize sub-agents to represent him/her in purchasing property, however the buyer should be aware that wrongful action by the real estate agent or sub-agents may subject the buyer to legal liability for those wrongful actions).

(NON-AGENT) FACILITATOR
When a real estate agent works as a facilitator that agent assists the seller and buyer in reaching an agreement but does not represent either the seller or buyer in the transaction. The facilitator and the broker with whom the facilitator is affiliated owe the seller and buyer a duty to present each property honestly and accurately by disclosing known material defects about the property and owe a duty to account for funds. Unless otherwise agreed, the facilitator has no duty to keep information received from a seller or buyer confidential. The role of facilitator applies only to the seller and buyer in the particular property transaction involving the seller and buyer. Should the seller and buyer expressly agree a facilitator relationship can be changed to become an exclusive agency relationship with either the seller or the buyer.

DESIGNATED SELLER'S AND BUYER'S AGENT
A real estate agent can be designated by another real estate agent (the appointing or designating agent) to represent either the buyer or seller, provided the buyer or seller expressly agrees to such designation. The real estate agent once so designated is then the agent for either the buyer or seller who becomes their client. The designated agent owes the buyer or seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put their client's interests first and negotiate for the best price and terms for their client. In situations where the appointing agent designates another agent to represent the seller and an agent to represent the buyer then the appointing agent becomes a dual agent. Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent. The dual agent does not represent either the buyer or the seller solely only your designated agent represents your interests. The written consent for designated agency
must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople.

DUAL AGENT
A real estate agent may act as a dual agent representing both the seller and buyer in a transaction but only with the express and informed consent of both the seller and buyer. Written consent to dual agency must be obtained by the real estate agent prior to the execution of an offer to purchase a specific property. A dual agent shall be neutral with regard to any conflicting interest of the seller and buyer. Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent. A dual agent does, however, still owe a duty of confidentiality of material information and accounting for funds. The written consent for dual agency must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople.

The Massachusetts Board of Registration of Real Estate Brokers and Salespeople provide a consumer brochure about real estate representation.

Without a buyer agent, clearly there's a question of loyalty.

Be Sure To Protect Your Massachusetts Home With a Declaration of Homestead

In Massachusetts, an estate of homestead, also referred to as the homestead act or a homestead deed, is an interest in real property designed to protect the possession and enjoyment of the owner and the owner's surviving spouse against the claims of creditors by protecting the property from execution and forced sale, as long as such person occupies or intends to occupy such property as his or her principal place of residence.

All homestead forms, or deeds, must be filed in the county in which the residence is located. The filing fee is $35. To acquire a claim of homestead in a manufactured home, the homestead declaration must be filed at the city or town clerk's office in the city or town the manufactured home is located.

An owner or owners of a home who occupy or intend to occupy said home as a principal residence may acquire an estate of homestead to the extent of five hundred thousand dollars ($500,000.00), and upon filing of a homestead shall be protected against attachment, levy on execution or sale to satisfy debt (except for certain cases that are specifically excluded by the statue); however, only one owner may acquire an estate of homestead in the home for the benefit of his or her family.

The statute defines owner to "include a sole owner, joint tenant, tenant by the entirety or tenant in common." It also defines family to "include either a parent and a child or children, a husband and wife and their children, if any, or a sole owner."

Should the spouse or parent who declares the homestead die, the law (Massachusetts General Law c. 188 §§ 1-10) protects the house until the youngest unmarried child reaches the age of eighteen (18) and until the surviving spouse dies or remarries.

An owner can declare a homestead on his or her principal residence only. A person can have more than one residence, but the statute only allows the protection of one's legal domicile. There apparently is not any legislative intent to allow the exemption to apply to a summer and a winter residence.

The estate of homestead is terminated upon the sale or transfer of the real property or mobile home during the declarant's lifetime, upon the death of the surviving declarant or by release of the homestead estate duly signed, sealed and acknowledged by the declarant and recorded in the Registry of Deeds, or when the property ceases to be your residence.

In some cases, a lending institution may require that your homestead be released when you refinance or take out a second mortgage. In such a case, once the mortgage is recorded or registered, you can record a new homestead.

Liens imposed as a result of the payment of Mass Health benefits are exempt from homestead protection. Upon the death of a recipient of Mass Health benefits, the Commonwealth may file a claim for reimbursement from the person's probate estate.

I draft a declaration of homestead free of charge for all my buyer clients.

DISCLAIMER: The above information, and all content within this blog and the pages linked to from it, is for informational purposes only. It is not, nor is it intended to be, legal advice. You should not rely on this information without consulting an attorney licensed in your state.

What Is A Buyer Broker / Agent?

A buyer agent or buyer broker (sometimes referred to as buyer agency) represents the buyer in a real estate transaction. Buyer agency is defined as follows: A principal agent relationship in which the broker is the agent for a buyer, with fiduciary responsibilities to the buyer. What does that mean? It means that a buyer agent is tied to the buyer, and that all of that agent's loyalties are to the buyer.

The seller's agent, or the listing agent, represents the seller, not the buyer, and his or her loyalties are to the seller. They must tell the seller anything you, the buyer, tell them, even if it hurts your negotiating position.

Although the benefits of a buyer agent are obvious, remarkably many individuals do not know they can have their own real estate agent who will look out for their best interests. Simply put, there isn't any reason not to have a buyer agent represent you and many important reasons to have a buyer agent.

• A buyer agent represents the buyer only, not the seller, and looks out for the buyer's best interest at all times. A buyer agent has a duty and obligation to get the best deal for the buyer(s).

• A buyer agent is paid the same seller-authorized commission split that is offered across the board to any agent who brings a buyer, so a buyer's agent does not collect any fees from the buyer.

• A buyer agent will pass along any information about the seller or his or her property to help the buyer make a smart decision and get a good deal.

• A buyer agent, especially an exclusive buyer agent,  has no interest in you buying any particular piece of property, so a buyer agent will provide you with objective advice. A buyer agent will spot potential problems with a home or any material defects. The seller's agent will not.

Massachusetts Septic System Law (Title V) 101

I've worked with several first-time home buyers that have had a negative perception of homes with septic systems. The perception is wrong. Sure, just being hooked into a town or city sewer may be the more convenient of the two waste disposal systems, but many beautiful and expensive homes in some of the best neighborhoods have septic systems.

The following is a brief description of the Massachusetts law regarding septic systems or cesspools, commonly referred to as Title V.

Homes that are not connected to a local sewer system use septic systems or cesspools, both of which are regulated by the state Department of Environmental Protection (DEP) and local boards of health. Local boards of health are the primary regulatory authorities; however, the DEP is involved in certain approvals.

A septic system has a tank, a distribution box, and soil absorption system commonly known as a "leach field" or "leaching field." A cesspool has a pipe carrying waste from the home to a pit that distributes liquid waste. Cesspools are much less common.

Improperly functioning septic systems and cesspools are a major cause of the pollution of our coastal waters, rivers, and water supplies. Since 1995, the state environmental code governing septic systems, commonly referred to as Title 5 regulations, has required inspections of septic systems and cesspools prior to a home being sold or enlarged. This inspection also includes a soil evaluation test, which a DEP-approved soil evaluator must perform. In most instances, systems that fail inspection must be repaired within 2 years.

Wherever feasible, a failed system must be upgraded to full compliance with Title 5. If this is not possible, in many instances the local Board of Health is authorized to approve a "Local Upgrade Approval" that brings the system as close to full compliance as possible in accordance with certain minimum criteria. In such cases, homeowners must apply to a local board of health for a variance from Title 5 regulations.

Cesspools that exhibit signs of hydraulic failure, are located extremely close to private or public water supplies, or otherwise fail to protect or pose a threat to public health, safety or the environment will need to be upgraded. Also, cesspools must be upgraded prior to an increase in design flow (i.e., the addition of a bedroom).

Typically the seller of a home will make the necessary repairs or upgrades to comply with Title IV regulations prior to the sale of a home.

DISCLAIMER: The above information, and all content within this blog and the pages linked to from it, is for informational purposes only. It is not, nor is it intended to be, legal advice. You should not rely on this information without consulting an attorney licensed in your state.